Dry Bulk FFA: Capesize Index To Face Further Pressure

Dry Bulk FFA: Capesize Index To Face Further Pressure

Highlights:
The index has completed 2 impulse waves down, this could be a simple A,B,C correction, however with the stochastic still below 50 we have the potential to see a 3rd impulse wave down.

Feb futures are starting to make higher highs, however the 8 period EMA remains below the 21 period EMA and at this point the Feb contract needs to do more to be considered as technically bullish.

Both the Q2 18 and Cal 19 futures remain above key MA’s and are making higher highs. However, both contracts are showing bearish divergences. Not a sell signal, it is considered a warning that upside momentum could be slowing.

The Capesize index remains in a corrective phase and looks to have completed 2 of 3 impulse waves lower.

Fibonacci resistance is between USD 15,061 – USD 17,286 (38.25 – 61.8%) of the last move down. Technical support is at the recent low of USD 11,458, with further support at USD 11,087 and USD 6,792.

Key resistance on the daily chart remains at USD 20,890, a close is needed above this level to confirm bullish impetus in the market, as this is the most recent high. However, downside moves from here over the coming days could reduce the key resistance level to the most recent high point, which is currently at USD 14,065.

Downside moves that fail to trade below the USD 11,458 level would imply that the downward move is losing momentum, and neutralise the current corrective phase.

Technical support at USD 11,200 held last week resulting in and upward move to USD 13,600.

The recent upside move has now made a higher high, and price action is now above the 21 period EMA. However the 8 period EMA remains below the 21 period EMA suggesting we need to see more in this move for it to be regarded as technically bullish. A cross in the EMA’s with EMA acting as support would be regarded a technically bullish.

Downside moves that hold above the recent low of USD 11,260 would neutralize the current bear move and strengthen the bullish technical argument.

Price action below the recent low would keep the technical in bearish territory and a new buy signal would need to develop.

Last week we noted the Q2 futures were in a corrective phase, but remained in bull territory. The futures pulled back and held at the 21 period EMA, signalling to technical buyers to enter the market.

Price action has now held at the 8 period MA and produced an up day. Technically we remain in bull territory. However, we now have a bearish divergence in the market, not a sell signal,it does warn that upside momentum could be weakening.

Technical support is at USD 15,440, with further support USD 14,045. A close below the USD 15,440 level would imply the current bull technical is starting to weaken, and could be entering into a corrective phase. However it is worth noting that price action is above all key moving averages at this point and the trend is regarded as bullish. Technical resistance is at USD 17,504 and USD 19,736.

The stochastic at 90 is back in overbought territory and showing a small bearish divergence. Not a sell signal in its own right, it does warn that upside momentum could be weakening. Price action continues to make higher highs and higher lows, whilst remaining above key moving averages. The divergence is a warning within the bull trend.

Technically the daily chart has seen 5 waves up in this move. From an Elliott wave perspective this would suggest that the market should soon enter into a corrective phase. This doesn’t necessarily mean that we are entering into a bear market, as the initial move started in June 2017, and would suggest that we have seen wave 5 of wave 3 at this point.

Technical support is at USD 15,690, a close below this level would create a lower low and signal that the Cal 19 futures are correcting.

A close above USD 16,585 would create a new high and be considered as technically bullish in the short term.